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Data Management Summit: The Challenges and Rewards of KYC Compliance

Financial firms are investing significant sums to meet Know Your Customer (KYC) requirements, but there are rewards beyond regulatory compliance for those that take a centralised approach to collecting and managing client data and documentation.

His first question asked why firms are putting so much effort into KYC. Joe Dunphy, head of product management at Fenergo, responded: “It is a commercial imperative for banks to get KYC right. There are new and existing regulations and we are experiencing an exponential increase in fines for firms that get it wrong. On-boarding clients properly can’t be ignored any more. If you don’t get it right, time to revenue goes up and there is an impact on new business. If you do get it right, it can be a competitive differentiator.”

Another driver behind getting KYC right is sanctions. Anna Mazzone, global head of KYC managed services at Thomson Reuters, explained: “If political problems around the world lead to sanctions against a country, you must be able to manage data quickly and get information to the front office so that the right business decisions can be made.”

Delaney cited research by A-Team Group showing cost as a key consideration in KYC, but questioned whether firms know the actual cost of compliance. Dunphy said: “We are researching how long it takes to on-board clients and the cost, and we are finding that one size does not fit all. For example, differing client types and business lines have different costs, but if costs can’t be measured, it is not possible to assess the benefit of on-boarding properly.”

Turning to the data management issues of KYC, Matthew Stauffer, CEO at Clarient Global, said: “KYC is about the collection, maintenance, support and control of data and documentation. It has been very document focussed, but it is becoming more data driven. There needs to be a link between data and underlying documentation for regulatory purposes and KYC is not just about one-time on-boarding, it is an ongoing process that needs to be managed. The challenge is knowing where content is sourced from, maintaining and refreshing it, and sustaining an audit trail.”

Pierre Quintard, CEO at Invoxis, concurred with the need for ongoing data and document monitoring and control, adding: “The challenge of gathering documents and data and meshing them with commercial interests is huge. Large companies can do all the processes and investigations necessary to get to this stage, but it is more difficult for smaller companies to carry out all the processes and get to the decision making stage.”

Providing a solution to the data management issues of KYC, Dunphy suggested firms should first identify which regulatory jurisdictions they fall into, collect relevant data and documentation, and then automate data management processes. He commented: “The data is not new, it is legal entity data, but it must be connected.”

On a broader scale, panel members agreed that centralised entity data is preferable to siloed date, not only for internal, but also for shared industry solutions. Mazzone said: “Centralised data provides a good solution. Data required for KYC is standard across the industry, and entities do business with multiple organisations. A managed service can process the data and deliver it to organisations that a client approves. The one to many concept is important here.” Stauffer added: “Data maintenance is a driver towards a utility that can provide the benefits of a centralised solution to many organisations.”

Summing up the rewards of building a centralised and automated system that collects data once and uses it many times, Dunphy concluded: “A centralised view of counterparties is hugely valuable from a business perspective. It allows an organisation to build out real value and drive new business and sales initiatives.”

Useful
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Whitepapers

Whitepapers

KYC & AML Client Reviews

In this paper, Joe Dunphy, Fenergo’s VP Product Management, explores the role that KYC periodic reviews has to play in the levying of fines in this area and contends that the big problem with KYC is KYD (Know Your Data).